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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






2. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






3. Exists if a producer can produce a good at lower opportunity cost than all other producers






4. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






5. When firms focus their resources on production of goods for which they have comparative advantage






6. Models where firms agree to mutually improve their situation






7. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






8. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






9. Two goods are consumer substitutes if they provide essentially the same utility to consumers






10. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






11. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






12. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






13. TR = P * Qd






14. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






15. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






16. The lost net benefit to society caused by a movement away from the competitive market equilibrium






17. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






18. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






19. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






20. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






21. The additional cost incurred from the consumption of the next unit of a good or a service






22. 0 < Ei < 1






23. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






24. Total product divided by labor employed. APL = TPL/L






25. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






26. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






27. The rational decision maker chooses an action if MB = MC






28. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






29. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






30. ATC = TC/Q = AFC + AVC






31. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






32. MUx / Px = MUy/Py or MUx/MUy = Px/Py






33. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






34. Occurs when LRAC is constant over a variety of plant sizes






35. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






36. Ed > 1 - meaning consumers are price sensitive






37. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






38. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






39. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






40. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






41. The imbalance between limited productive resources and unlimited human wants






42. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






43. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






44. Exists if a producer can produce more of a good than all other producers






45. A good for which higher income increases demand






46. The change in quantity demanded resulting from a change in the price of one good relative to other goods






47. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






48. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






49. A firm that has market power in the factor market (a wage-setter)






50. The practice of selling essentially the same good to different groups of consumers at different prices